'Stop the greedy firms that prey on flat owners': Campaigners demand help to curb bullying freeholders and exorbitant fees

Owners of flats should be given greater protection against greedy freeholders and expensive property management companies.

That is the view of Sebastian O’Kelly, who spearheads Leasehold Knowledge Partnership, a pressure group set up to protect leaseholders from being exploited by freeholders and their agents.

According to the Leasehold Knowledge Partnership there are more than five million leasehold properties in England and Wales. Most are flats where the building’s freehold is owned by a company.

Shock: Michelle Peake (pictured with son Jake) had her items removed by her property management company

As leaseholders they must stick to any conditions spelt out in the lease. They must also pay a service charge to cover the cost of buildings insurance and maintenance – everything from cleaning to keeping any communal gardens tidy and general repairs.

Although there have been numerous efforts to make leasehold law fairer, leaseholders can be bullied by freeholders, paying exorbitant fees for maintenance of the buildings that bear no resemblance to the work done or services offered.

In some instances, agents employed to look after buildings are connected to the freeholder, providing scope, says O’Kelly for ‘kickbacks’. ‘It’s a bit like a fox being in charge of the hen coop,’ he adds.

‘Owning a freehold can prove extremely profitable,’ says O’Kelly. ‘No one is buying freeholds just for the ground rents.

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You are able to appoint the property’s manager, insure the building and get commission, and you can choose who to employ if major work has to be done to the building.

‘Some freeholders have industrialised these opportunities and the odds are stacked against leaseholders fighting back.’ Service charges run to some £3 billion a year.

O’Kelly has been meeting with MPs, including Shadow Housing Minister Emma Reynolds, to get leasehold reform higher up the political agenda.

Leasehold Knowledge Partnership already has the backing of veteran Conservative MP Sir Peter Bottomley, Lib Dem MP Edward Davey, and Jim Fitzpatrick, a Labour MP who has some of the richest and poorest leaseholders in his London Docklands constituency.

Last month, Lib Dem peer Baroness Maddock called for reform in a House of Lords debate, arguing that the current system puts ‘too much power in the hands of freeholders’.

She was backed by Baroness Gardner of Parkes who said there were too many instances of leaseholders paying for service charges where the freeholder has ‘made a deal with or even owned the builders or insurance company used’.

Earlier this year, the Office of Fair Trading – now part of the Competition and Markets Authority – launched an investigation into the property management industry amid concerns that leaseholders are not getting a fair deal.

It will report this autumn and has the power to recommend changes to the law. As part of its investigation it will look into whether freeholders’ choice of property management services is unduly influenced by links with associated companies and the availability of commission payments. It will also assess whether the market could benefit from greater competition.

Leaseholders have the right to request a change of property manager by applying to the First Tier Tribunal (Property Chamber) but they must be able to prove bad management – unreasonable service charges for example – for any change to be enforced.

They can also band together and set up a company to manage the property themselves under the ‘right to manage’.

But it’s not easy to do and few people know about it. There have been calls for details on right to manage to be included in any mail leaseholders receive related to service charges.

Michelle Banks is chief executive of the Association of Residential Managing Agents, a trade body that represents more than 300 property management companies. She believes the sector should be regulated, something the previous Labour Government was interested in but for which the Coalition has shown no enthusiasm.

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She says: ‘There are no barriers to entry, which means anyone can become a managing agent.’

From next year, the association is introducing its own regulatory regime – ARMA-Q (the Q stands for quality) – with agents required to adhere to a consumer charter and more than 160 ‘standards’ covering everything from how they should deal with contractors to handling of complaints.

A regulatory panel has also been set up to investigate complaints against association members.

Banks says: ‘We want to get to a stage where leaseholders can see the association’s logo and know they are dealing with a property management company they can rely on to play fair.’

Andrew Kafkaris of London-based residential property management company Bruton Street Management says standards will only improve if the managers put in charge of blocks of flats are competent and properly trained.

He says: ‘Currently, anyone can be plucked off the street and put in charge.’ His company adheres to the ‘service charge residential management code’ laid down by the Royal Institution of Chartered Surveyors and he only employs chartered surveyors to manage properties.

O’Kelly is sceptical over the association’s attempt to raise standards, but like Banks he believes there needs to be a ‘degree of regulation’ to protect leaseholders’ funds. ‘Property management companies determine how huge sums of leaseholders’ money are spent. Some of it is spent inappropriately,’ he says.

As a first step he would like to see all new flats contain in their leases a residents’ management company that would ‘empower’ buyers from the start and ‘reduce the opportunities for sharks’.

He also believes leasehold should be replaced by ‘commonhold’, which exists in the rest of the world apart from England and Wales.

With commonhold, those living in a block of flats would own and manage the common parts – such as the roof, stairs and landing – through a limited company called a ‘commonhold’ association. This would negate the need for a freeholder and put an end to flat owners being fleeced.

I THOUGHT I'D BEEN ROBBED, BUT IT WAS THE PROPERTY MANAGERS

When Michelle Peake - pictured at the top of the story - discovered the
cupboard outside her flat where she kept various items had been emptied,
her first thought was that she had been robbed.

Gone was an inflatable pool for her seven-year-old son Jake, plus walking boots, a jacket, a coat and a mop and bucket.

But Michelle, 39, who lives with partner Jason in a block of flats in Nuneaton, Warwickshire, had not been robbed.

Her items had been removed by her property management company.

‘I’ve
lived in the flat as a tenant for the past eight years,’ says Michelle,
an administrator for a firm of financial planners.

‘I’ve
always kept possessions in the cupboard as have others who live in the
flats and have identical storage space. No one has ever said anything
and I’ve assumed that it was my storage space to use.’ But just before

Christmas she realised her cupboard had been emptied.

‘I
thought our belongings had been stolen, but after speaking to
neighbours I realised their cupboards had also been cleared out,’ she
says.

Property management company Castle Estates, based in Stafford, had cleared them because of a ‘fire risk’.

Letters had been sent to leaseholders but Michelle and her landlord said they had not received them.

When
she contacted Castle Estates, she was first told she would be able to
get back her belongings. But in a later call she was told her
possessions had been disposed of.

She says: ‘What I don’t understand is that for the last eight years storing items in the cupboard has never been an issue.’

Castle
Estates told The Mail on Sunday: ‘The lease prohibits leaseholders from
keeping any items in the common parts and failure to comply with the
lease means the leaseholder will be in breach of the lease and therefore
the landlord has the right to enforce the breach.’

Castle Estates is not a member of the Association of Residential Managing Agents.

Have you had problems with a property management company?Email jeff.prestridge@mailonsunday.co.uk